A class action lawsuit was filed in the United States District Court for the Southern District of New York on behalf of purchasers of the securities of Mechel OAO (NYSE: MTL) between October 3, 2007 and July 25, 2008, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). The complaint charges Mechel and certain of its officers with violations of the Exchange Act. Mechel is a vertically integrated mining and metals company. The Company consists of several business segments, including coal and steel production. Mechel’s mining business consists of coal, iron ore and nickel mines in Russia. The Company’s steel business includes the production and sale of semi-finished steel products, carbon and specialty long products, carbon and stainless flat products and downstream metal products.
The complaint alleges that, throughout the Class Period, defendants failed to disclose material adverse facts about the Company’s financial well-being, business relationships, and prospects. Specifically, we allege that defendants failed to disclose or indicate the following: (i) that the Company had engaged in anticompetitive conduct by employing a discriminatory pricing policy for raw material sales between domestic and foreign steel firms; (ii) that the Company had engaged in monopolistic conduct by fixing and maintaining coking coal prices at artificially high levels and unreasonably refusing contracts; (iii) that as the Company’s anticompetitive and monopolistic practices were discovered, the Company would incur a significant level of fines, and would be forced to enter into long term coking coal supply contracts below market prices; (iv) that a portion of the Company’s revenue was derived from anticompetitive and monopolistic conduct, and when such behavior was discovered, the Company’s revenue would significantly decline in future periods; (v) that the Company had used a sophisticated sales and distribution scheme involving wholly owned offshore trading companies to evade paying taxes on a portion of its revenue; (vi) that the Company lacked adequate internal and financial controls; (vii) that the Company’s financial statements were not prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”); and (viii) that, as a result of the foregoing, the Company’s financial statements were materially false and misleading at all relevant times.
According to the complaint, on July 24, 2008, Russian Prime Minister Vladimir Putin called for antitrust authorities to investigate Mechel’s raw material pricing policy, and in particular its coking coal sales, as the Company had sold raw materials to customers in Russia at twice that it had sold raw materials to non-Russian customers. Prime Minister Putin also recommended that Mechel’s profit margins needed to be examined by the antitrust authorities, and “if need be,” by the special committee of the General Prosecutor. On this news, the Company’s shares fell $13.77 per share, or over 37.6 percent, to close on July 24, 2008 at $22.84 per share, on unusually heavy trading volume.
Then on July 28, 2008, Prime Minister Putin also revealed that Mechel had also used offshore traders to minimize tax payments. According to the Prime Minister, Mechel sold coal to a Swiss trading unit at a quarter of domestic prices, contributing to a coal shortage and higher steel prices in Russia. On this news, the Company’s shares fell $6.70 per share, or over 25.5 percent, to close on July 28, 2008 at $19.50 per share, on unusually heavy trading volume.
If you are a current shareholder or purchased shares during the period of October 3, 2007 and July 25, 2008 and would like to discuss your options of exercising your rights as a shareholder, please contact us.
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